CHAPTER 6: MASTER BUDGET AND RESPONSIBILITY ACCOUNTING

Posted on Posted in General General Questions, General Questions

THE FOLLOWING INFORMATION APPLIES TO
QUESTIONS 107 AND 108.

Furniture, Inc., estimates the following
number of mattress sales for the first four months of 20×4:

Month Sales

January 5,000

February 7,000

March 6,500

April 8,000

Finished goods inventory at the end of December
is 1,500 units. Target ending finished
goods inventory is 30% of next month’s sales.

107. How
many mattresses need to be produced in January 20×4?

a. 4,400 mattresses

b. 5,600 mattresses

c. 6,500 mattresses

d. 7,100 mattresses

108. How
many mattresses need to be produced in the first quarter (January, February,
March) of 20×4?

a. 18,500 mattresses

b. 19,400 mattresses

c. 20,900 mattresses

d. 22,400 mattresses

THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 109
AND 110.

Wallace Company provides the following
data for next year:

Month Budgeted
Sales

January $120,000

February 108,000

March 132,000

April 144,000

The gross profit rate is 40% of sales.
Inventory at the end of December is $21,600 and target ending inventory levels
are 30% of next month’s sales, stated at cost.

109. Purchases
budgeted for January total

a. $130,800.

b. $72,000.

c. $69,840.

d. $74,160.


110. Purchases
budgeted for February total

a. $69,120.

b. $60,480.

c. $115,200.

d. $64,800.

111. Financial
planning software packages assist management with

a. assigning responsibility to various levels
of management.

b. identifying the target customer.

c. sensitivity analysis in their planning and
budgeting activities.

d. achieving greater commitment from lower
management

112. __________ utilizes a “what-if” technique that
examines how results will change if the originally predicted data changes.

a. A
sales forecast

b. A
sensitivity analysis

c. A
pro forma financial statement

d. The
statement of cash flows

113. When
performing a sensitivity analysis, if the selling price per unit is increased,
then the

a. per unit fixed administrative costs will
increase.

b. per unit direct materials purchase price
will increase.

c. total volume of sales will increase.

d. total costs for sales commissions and
other nonmanufacturing variable costs will increase.


THE FOLLOWING INFORMATION APPLIES TO
QUESTIONS 114 THROUGH 116.

Ossmann Enterprises reports year-end
information from 20×4 as follows:

Sales
(80,000 units) $480,000

Cost
of goods sold 320,000

Gross
margin 160,000

Operating
expenses 130,000

Operating
income $ 30,000

Ossmann is developing the 20×5 budget. In
20×5 the company would like to increase selling prices by 8%, and as a result
expects a decrease in sales volume of 10%.
All other operating expenses are expected to remain constant. Assume
that COGS is a variable cost and that operating expenses are a fixed cost.

114. What
is budgeted sales for 20×5?

a. $518,400

b. $533,333

c. $466,560

d. $432,000

115. What
is budgeted cost of goods sold for 20×5?

a. $311,040

b. $288,000

c. $345,600

d. $320,000

116. Should
Ossmann increase the selling price in 20×5?

a. Yes, because operating income is increased
for 20×5.

b. Yes, because sales revenue is increased
for 20×5.

c. No, because sales volume decreases for
20×5.

d. No, because gross margin decreases for
20×5.

.

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